BPO

BPOs likely to face more short-term pains

Posted by : Stockblogger

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The Indian BPO industry, hurt by a slowing business environment due to the sub-prime crisis in the US, expects further pain in the short-term due to the recent shotgun mergers of large US investment banks.The industry also expects pricing pressure and reduction in the volume of work in the near future. The last month saw the collapse of banks such as Lehman Brothers Holdings Inc, Merrill Lynch & Co and Wachovia Corp. The Indian IT and BPO industry gets about 30 to 40 per cent of its business from the BFSI sector.

Rebalancing of work


In the short-term, the situation would be very, very painful, said Mr Raman Roy, Chief Executive, Quatrro. “There would be a lot of re-balancing of work at the company level and some vendors could lose business,” he added. Mr Roy said companies such as Bank of America, which have their own captive centres in India, might offshore more work to the captives rather than to a third party vendor.

In such a situation, the vendor working for Merrill Lynch would lose business. Bank of America has agreed to buy Merrill Lynch. The meltdown will further extend the decision making cycle and delay new business proposals.

“People are nervous and there is anxiety in the environment,” said Mr Sandeep Aggarwal, Executive Vice-President, Sales, Solutions, Transition, Intelenet Global Services. He said because of shrinkage of business for some of the US banks, the volume of business for the BPO companies would get impacted. “In a situation like this, it is logical to have pricing pressure as well,” he added.

HTMT Global said BPOs with exposure to the financial sector would get affected. “The effect could amount to reduction in the number of seats, or there could be re-alignment in the areas of work,” said Mr Viswanath Rao, Executive Vice-President, Operations.On being asked how long the lean period would continue, Mr Raman Roy said, “It depends. We are in a continuum. It’s a mess in the US.” It is not a matter of weeks, but months and years, he added.

In the next one and a half years, the companies in the US would be more focused on growing their topline, said Mr Glen Serrao, Engagement Manager, Zinnov Consulting. They would concentrate on increasing their business rather than saving some money by offshoring, he added.

However, the Indian BPO industry expects offshoring to increase after the US companies have taken stock of the situation. Mr Roy said in the medium to long-term, countries such as India and Philippines would gain.

The weakening rupee would offset the slowdown in the business to an extent in the short-term, Mr Aggarwal said.

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US turmoil may not affect outsourcing

Posted by : Accolade

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Regulatory intervention in US financial institutions such as American International Group (AIG), Freddie Mac and Fannie Mae to avert insolvency, is unlikely to alter the outsourcing landscape for Indian vendors.

Despite being controlled by the US government, these entities may continue to take independent outsourcing decisions looking for technology solutions to cut costs.

“It would be a wild guess to say as to how these entities would behave as US tax payer’s money is used for bail-outs,” said Mr Vineet Nayyar, CEO, HCL Technologies Ltd, the country’s fifth largest software exporter.

“However, if these companies resort to in-sourcing, it will be a very expensive decision as many of them have already outsourced their technology functions” Mr Nayyar said.

Backlash issues


Traditionally, the Indian IT vendors have faced issues working with the state-owned agencies in the US mainly due to the backlash associated with job cuts from such government deals. As a result, the exposure to government sector has been minimal accounting for less than five per cent of revenues for many of the Indian vendors.

“It is too early to comment,” said Mr Siddarth Pai, Managing Director of outsourcing firm TPI’s India operations, on the possible impact of the government control of some financial instituionss. “At the same time, it will be difficult to move those (outsourced) operations back,” Mr Pai said.

Indian IT vendors earn over a third of their revenues from the banking and financial services sector and US accounts for more than half of their total revenues.

“I feel the government is not going to be involved in the decision making process such as outsourcing of technology operations,” said Mr Avinash Vashishta, CEO of Tholons Inc, an advisory firm.

Moreover, there could be selective gains for Indian vendors as consolidation happens in the US financial services sector, Mr Vashistha said. Further, IT buying could increase as investment banks such as Morgan Stanley and Goldman Sachs turn into commercial banks.

Polaris Software Lab Ltd, one of vendors of the troubled-AIG, signed a Global Professional Services Agreement (PSA) with the American firm in August, which it sees as a potential revenue source for future.

“The PSA as on date is valid in its original form. We read the current situation as an opportunity as AIG will be looking for technology solutions led with cost cutting,” said Mr R. Shrikanth, Chief Financial Officer, Polaris.

Overseas buys


Large vendors such as Wipro and Infosys are expanding their overseas delivery footprint by acquiring local companies that should help them bid for government contracts going forward.

Wipro acquired Infocrossing Inc, the New Jersey-based infrastructure management firm, in a $600 million deal last year that had exposure to government agencies. Infosys’ proposed acquisition of Axon should help the company’s improve its exposure to government deals going forward, analysts said.

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dow not break 10800 now

Posted by : w.sharekhoj.kom

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yes watch out if break then more down side ...